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Investing.com - The "stakes are high" ahead of an annual economic symposium later this week that will feature a much-anticipated speech from Federal Reserve Chair Jerome Powell, according to analysts at Evercore ISI.
In a note to clients, the analysts predicted that Powell would likely signal a 25-basis point interest rate cut in September, and underline that any reductions over the rest of the year would be "data dependent."
They added that the economic data surrounding the event has been "muddled."
U.S. job growth was significantly weaker than anticipated last month, while the totals for June and May were revised sharply lower. Meanwhile, retail sales rose strongly, following an unexpectedly steep uptick in producer prices.
These figures, coupled with relatively restrained consumer price indicators, have painted a complex picture of a possibly slowing labor market and some tariff-driven -- albeit relatively muted -- inflationary pressures.
All this comes as Trump’s actions have also cast doubt over the reliability of U.S. government data and led some analysts to predict a rush of interest in private-label numbers. Trump sparked these worries after he dismissed the commissioner of the agency charged with collecting the statistics, citing without evidence that the downward revisions in the latest jobs report were designed to hurt him politically. He later nominated the chief economist from the conservative think tank Heritage Foundation to lead the agency.
Stepping into these crosswinds will be Powell, who will deliver a closely-watched speech at an annual symposium in Jackson Hole, Wyoming on Friday. Powell has long advocated for a more cautious approach to policy actions, but markets -- who are themselves penciling in a rate cut at the Fed’s next meeting in September -- are curious to see if his opinions have shifted after the recent data deluge.
Analysts at ING noted that the Fed’s September meeting could be "explosive," as it may be the latest episode in Powell’s ongoing "tug-of-war" with Trump, who has criticized the Fed leader for not advocating for quick rate cuts to boost the economy.
Against this backdrop, the Evercore ISI analysts recommended that investors focus on artificial intelligence-centric stocks and sectors, such as communications services and information technology.